Where Amazon is vulnerable

Michael Hiltzik

Los Angeles Times

“Is Amazon heading for world domination, or cruising for a bruising?” asked Michael Hiltzik. After “blowout” first-quarter results—$1.6 billion in profit, more than double the haul Amazon reported a year ago—market pundits are predicting the $763 billion e-commerce giant could soon be “the world’s first trillion-dollar company.” It’s not a stretch. For Amazon to get there, its share price would need to rise another 30 percent, and it’s already notched a 33 percent gain this year. But while there’s plenty of evidence to support the “prevailing narrative” that Amazon is unstoppable, there’s also overlooked data indicating major vulnerabilities. The company only pockets 1.7 cents from each $1 of sales, which doesn’t leave much margin for error. Then there’s global Prime membership: Amazon’s recent revelation that it has 100 million members was widely regarded as “astonishing.” But market estimates had pegged U.S. membership alone at 90 million, so in that light, the total could be “interpreted as a disappointment, not an achievement.” Finally, Amazon Web Services, which has been a profit powerhouse, is also facing sustained competition. The business landscape “is littered with the bones of companies whose positions once seemed unassailable.” We’d do well to look for signs that “Amazon euphoria is feeding on itself.”